USDNOK Wobbling at Critical Support. USDSEK Recovery Ahead?
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NORDIC FX, NOK, SEK WEEKLY OUTLOOK
- USDNOK risks breaking below critical 15-month rising support
- USDSEK may be on the path to recovery after briefly retreating
- Rising Fed rate cut expectations causing broad USD weakness
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USDNOK aggressively fell after breaking below the lower layer of the 8.6937-8.7883 support range (yellow lines) and is now testing the bottom lip of 15-month rising support (red parallel channel). The last time the pair came this close was back in April, leading to fears that a break below with follow-through could trigger a bearish reversal for USDNOK.
USDNOK – Daily Chart
The pair’s fall has less to do with capital flow to NOK and more with broader weakness in the US Dollar amid increasing expectations of a Fed rate cut. If dovish signals continue to be broadcasted from Chairman Jerome Powell, it could give enough momentum for the pair to break below support. Such a move may be followed by an aggressive selloff.
Were the pair to break support, traders might hold off on offsetting their long positions until the downtrend is confirmed with follow through, lest they risk exiting under a false breakout. The dominant uptrend remains strong, and the pair is already showing signs of recovery. The next landmark will be overcoming the previous congestive channel and resuming its uptrend above 8.7883.
USDNOK Uptrend at Risk?
SWEDISH KRONA CHART ANALYSIS
After trading above 17-year highs, USDSEK subsequently retreated after the sugar rush turned into a crash. Negative RSI divergence showed slowing momentum for the pair prior to its slide, though now USDSEK may now be in the process of resuming its broad uptrend. The pair are less than a one percent decline away from touching 18-month rising support (blue channel).
USDSEK – Daily Chart
If the pair broke through or even touched critical support, it could make traders jittery on the prospect that USDSEK might deviate from its dominant uptrend. The pair will likely continue to climb higher amid broader fundamental themes that are supportive of USD at the expense of the cycle-sensitive Swedish Krona. The next objective for the pair is to re-enter the resistance range between 9.5323-9.5767 (red dotted lines).
USDSEK Eyeing Key Resistance Range
SWEDISH KRONA, NORWEGIAN KRONE TRADING RESOURCES
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.